Help for home owners, investors keeps newbies out of market

GOVERNMENT tax and welfare policies that favour home owners and property investors are named as one of the major causes of the widening divide between those that have property in this country and those who have yet to step into the market.

A report by the Grattan Institute says policies such as negative gearing and the capital gains discounts offer property investors an average of $4500 a year while exemptions for the family home from land and capital gains taxes and the eligibility test for the aged pension results in benefits to homeowners amount to around $36 million annually.

Private renters, by contrast, receive very little support through the tax and welfare system, even though they make up nearly one in four households.

Home ownership rates have fallen noticeably among lower income households and for people younger than 45.

Grattan Institute cities program director Jane-Frances Kelly said that only about a quarter of renters receive Commonwealth rent assistance which is a scant sum compared with the relief given to property owners.

She added that development restrictions, population increases and smaller household sizes had contrived to push up property prices, which despite falling interest rates, were beyond the reach of many Australians.

"Government policies are inflating demand for housing and therefore putting up prices, and that's through things like negative gearing and capital gains discounts for property, and first homeowner grants, which just end up pushing up prices and ironically making it harder for first-time buyers to get into the market," she said.

The report suggests a review of the perks given to investors and home owners as well as encouraging longer term leases to afford tenants some security.